Southwest Airlines provides scheduled air transportation services in the United States. Like many airlines, Southwest leases many of its planes from Boeing Company. In its long-term debt disclosure note included in the financial statements for the year ended December 31, 2013, the company listed $56 million in lease obligations. The existing leases had an approximate eight-year remaining life and future lease payments average approximately $8 million per year.

Required:

1. Determine the effective interest rate the company used to determine the lease liability assuming that lease payments are made at the end of each fiscal year.

2. Repeat requirement + assuming that lease payments are made at the beginning of each fiscal year.